ACCT200 Chapter Notes - Chapter 5: Cash Flow Statement, Cash Flow, Accounts Receivable

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taupelion650

19 May 2016

School

University of Delaware

Department

Accounting

Course

ACCT200

Professor

Debessay Araya

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Document Summary

Accounts receivable are the expected future receipts that arise when a company permits its customers to buy now and pay later. The amounts are usually small with a short term to maturity. Notes receivable have longer terms to maturity and are usually for larger amounts. The note specifies the maturity date, interest rate, and other credit terms. The net realizable value is the amount expected to be collected from accounts receivable. It is the face value of receivables less an allowance for estimated uncollectible accounts. Allowance for doubtful accounts is a contra asset account. Estimating uncollectible accounts expense improves the accuracy of financial statements by (1) reporting expected realizable value of receivables (i. e. , future cash flows) and (2) presenting a better matching of expenses with related revenues. This provides a better measure of managerial performance: when using the allowance method, uncollectible accounts expense is matched with current revenues.

Related Questions

Under the allowance method of accounting for uncollectible accounts

a. the net realizable value of accounts receivable is greater before an account is written off than after it is written off.

b. the net realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.

c. Allowance for Doubtful Accounts is closed each year to Income Summary.

d. all of these.

e. Bad Debt Expense is debited when a specific account is written off as uncollectible.

amethystlouse777

PROBLEM #1

At the beginning of the year, Sonoran Park Equipment's accounts receivable balance was $105,000 and the allowance for doubtful accounts had a $1,950 credit. Sonoran's sales in the current year were $787,500, 80% of which were on credit. Collections on account during the year were $502,000. Additionally, Sonoran wrote off $3,000 of uncollectible accounts during the year. It is estimated that 6% of the year end accounts receivable are expected to be uncollectible.

Using the allowance for bad debts based on accounts receivable aging method, determine the journal entry for the estimate of bad debts. What is Sonoran's net realizable value of accounts at the end of the year?

Journal Entry

Show work here:

B. Net Realizable Value

turquoiseantelope959

4 Effect of recovering a receivable previously written off

The accounts receivable balance for Donâs Shoe Repair atDecember 31, 2014, was $87,000. Also on that date, the balance inAllowance for Doubtful Accounts was $3,000. During 2015, $2,300 ofaccounts receivable were written off as uncollectible. In addition,Donâs Shoe Repair unexpectedly collected $130 of receivables thathad been written off in a previous accounting period. Sales onaccount during 2015 were $218,000, and cash collections fromreceivables were $220,000. Uncollectible accounts expense wasestimated to be 1 percent of the sales on account for the period.Also on that date, the balance in Allowance for Doubtful Accountswas $3,000 and the balance in Retained Earnings was $84,000.

Required

Organize the information in accounts under an accountingequation. (Show effect on the accounting equation in theorder provided in the question. Enter any decreases to accountbalances with a minus sign. Select "NA" if there is no effect onthe "Accounts Titles for Retained Earnings".)

Cash + Accounts Receivable - Allowance = Liabilities +Equity/Retained Earnings Accounts Titles for

Retained Earnings

b Based on the precedinginformation, compute (after year-end adjustment):
	(1) Balance of Allowance forDoubtful Accounts at December 31, 2015.
	(2) Balance of AccountsReceivable at December 31, 2015.
	(3) Net realizable value ofAccounts Receivable at December 31, 2015.

ALLOWANCE FOR DOUBTFUL ACCOUNTS ( )

ACCOUNTS RECEIVABLE ( )

NET REALIZED VALUE ( )

c What amount of uncollectible accounts expense will Donâs ShoeRepair report for 2015?

UNCOLLECTIBLE ACCOUNTS EXPENSE ( )

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ACCT200 Chapter Notes - Chapter 5: Cash Flow Statement, Cash Flow, Accounts Receivable

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